Does Fiscal Decentralization Improve Health Outcomes? Evidence from a Cross-Country Analysis

Greater fiscal decentralization is consistently associated with lower mortality rates. And its positive effects on infant mortality are greater in institutional environments that promote political rights.Decentralization of fiscal responsibilities has emerged as a primary objective on the agendas of national governments and international organizations alike. Yet there is little empirical evidence on the potential benefits of this intervention. Robalino, Picazo, and Voetberg fill in some quantitative evidence.Using panel data on infant mortality rates, GDP per capita, and the share of public expenditures managed by local governments, they find that greater fiscal decentralization is consistently associated with lower mortality rates. The results suggest that the benefits of fiscal decentralization are particularly important for poor countries. They suggest also that the positive effects of fiscal decentralization on infant mortality are greater in institutional environments that promote political rights.Fiscal decentralization also appears to be a mechanism for improving health outcomes in environments with a high level of corruption. In environments with a high level of ethnolinguistic fractionalization, however, the benefits from fiscal decentralization tend to be smaller.This paper - a product of Human Development 1, Africa Technical Families - is part of a larger effort in the region to conduct rigorous analysis of the implications of fiscal decentralization on the financing and delivery of social services. The authors may be contacted at drobalino@worldbank.org, opicazo@worldbank.org., or avoetberg@worldbank.org